UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 July 31, 2003 Date of Report (Date of earliest event reported) FIRST BANKS, INC. (Exact name of registrant as specified in its charter) MISSOURI 0-20632 43-1175538 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Identification No.) 135 North Meramec, Clayton, Missouri 63105 (Address of principal executive offices) (Zip code) (314) 854-4600 (Registrant's telephone number, including area code) Not Applicable (Former name or former address, if changed since last report) FIRST BANKS, INC. TABLE OF CONTENTS Page ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.................... 1 SIGNATURES.................................................................. 2 ITEM 12 - RESULTS OF OPERATIONS AND FINANCIAL CONDITION On July 25, 2003, First Banks, Inc. issued a press release announcing its financial results for the three and six months ended June 30, 2003. A copy of the press release is attached as Exhibit 99.4. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRST BANKS, INC. July 31, 2003 By: /s/ Allen H. Blake -------------------------------------- Allen H. Blake President, Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) Exhibit 99.4 First Banks, Inc. St. Louis, Missouri Contact: Allen H. Blake President, Chief Executive Officer and Chief Financial Officer First Banks, Inc. (314) 592-5000 Traded: NASDAQ Symbol: FBNKN - (First Preferred Capital Trust II, a subsidiary of First Banks, Inc.) FBNKM - (First Preferred Capital Trust III, a subsidiary of First Banks, Inc.) Traded: NYSE Symbol: FBSPrA - (First Preferred Capital Trust IV, a subsidiary of First Banks, Inc.) FOR IMMEDIATE RELEASE: First Banks, Inc. Announces Second Quarter 2003 Earnings St. Louis, Missouri, July 25, 2003. First Banks, Inc. ("First Banks" or the "Company") reported earnings of $14.7 million and $33.7 million for the three and six months ended June 30, 2003, respectively, compared to $9.4 million and $17.4 million for the comparable periods in 2002. Results for 2003 reflect increased net interest income, noninterest income and slightly reduced provisions for loan losses, offset by higher operating expenses. Included in the first quarter of 2003 was a gain of $6.3 million relating to the partial exchange of First Banks' investment in an unaffiliated financial institution for a 100% ownership interest in one of the unaffiliated financial institutions' banking subsidiaries. James F. Dierberg, Chairman of First Banks, said, "First Banks' financial performance for the first six months of 2003 reflects our adaptation to the low interest rate environment and weak economic conditions that have prevailed during the last two years. During this time, we have focused on increasing our net interest margin, improving asset quality and further strengthening our overall financial position. Throughout 2002, we experienced higher-than-normal loan charge-offs, loan delinquencies and nonperforming loans that led to increased provisions for loan losses, thereby reducing net income. While we believe we were successful in addressing the asset quality problems during 2002, we are continuing to closely monitor our operations to address the ongoing challenges posed by the current economic environment, including reduced loan demand and lower prevailing interest rates." Commenting further, Dierberg said, "We experienced continuing growth of net interest income, primarily resulting from reduced deposit rates, the earnings on our interest rate swap agreements that we entered into in conjunction with our interest rate risk management program, which mitigate the effects of decreasing interest rates, and a $61.3 million net reduction in our outstanding trust preferred securities." The derivative financial instruments used to hedge First Banks' interest rate risk contributed $15.8 million and $30.8 million to net interest income for the three and six months ended June 30, 2003, respectively, compared to $12.6 million and $23.8 million for the comparable periods in 2002. In addition, during the second quarter of 2003, the Company redeemed $132.3 million of trust preferred securities that had been issued during 1997 and 1998. In March 2003, First Bank Statutory Trust issued $25.0 million of trust preferred securities in a private placement and in April 2003, First Preferred Capital Trust IV issued $46.0 million of trust preferred securities in an underwritten public offering. These transactions, coupled with the use of additional derivative financial instruments, have allowed First Banks to reduce its overall expense associated with the utilization of trust preferred securities. Mr. Dierberg pointed out, "We are pleased with the results of these transactions on our financial performance; however, prevailing low interest rates, generally weak loan demand and overall economic conditions continue to exert pressure on our net interest margin." The Company recorded provisions for loan losses of $10.0 million and $21.0 million for the three and six months ended June 30, 2003, respectively, compared to $12.0 million and $25.0 million for the comparable periods in 2002. During 2002, the Company experienced a higher level of problem loans and related loan charge-offs and past due loans resulting from the economic conditions within the Company's markets, additional problems identified in two acquired loan portfolios and continuing deterioration in the portfolio of leases to the airline industry. Net loan charge-offs were $10.8 million and $13.3 million for the three and six months ended June 30, 2003, respectively, compared to $7.9 million and $19.7 million for the comparable periods in 2002. Net charge-offs for the six months ended June 30, 2003 include charge-offs of $10.4 million associated with the commercial leasing portfolio and were primarily concentrated in two equipment leases aggregating $7.0 million. Nonperforming assets at June 30, 2003 increased slightly to $83.2 million from $82.8 million at December 31, 2002 and $77.1 million at June 30, 2002. In recognition of this, the allowance for loan losses increased to $107.8 million at June 30, 2003, compared to $99.4 million at December 31, 2002 and $103.8 million at June 30, 2002. The Company expects nonperforming assets to remain at the higher levels recently experienced and considers these trends in its overall assessment of the adequacy of the allowance for loan losses. Noninterest income was $25.4 million and $57.1 million for the three and six months ended June 30, 2003, respectively, compared to $20.5 million and $39.4 million for the comparable periods in 2002. The increase in noninterest income is primarily attributable to a $6.3 million gain on the exchange of common stock of Allegiant Bancorp, Inc., St. Louis, Missouri ("Allegiant"), held by First Banks for a 100% ownership interest in Bank of Ste. Genevieve, Ste. Genevieve, Missouri. The increase is also due to gains on mortgage loans sold, which increased to $10.1 million and $20.7 million for the three and six months ended June 30, 2003, respectively, from $7.3 million and $12.5 million for the comparable periods in 2002. This increase reflects continued reductions in mortgage loan rates, resulting in high volumes of new originations and refinancings as well as the growth of the Company's mortgage banking activities. Higher noninterest income for 2003 also reflects increases in service charges on deposit accounts and customer service fees. Operating expenses were $64.1 million and $123.7 million for the three and six months ended June 30, 2003, respectively, compared to $59.2 million and $116.1 million for the comparable periods in 2002. The increased operating expenses primarily result from increases in salaries and employee benefit expenses associated with acquisitions, increased commissions paid to mortgage loan originators due to continued higher loan volumes, and staff realignments surrounding the Company's core business strategies. In addition, occupancy and furniture and equipment expenses have increased and result primarily from acquisitions, technology expenditures for equipment, continued expansion and renovation of various corporate and branch offices and a $1.0 million lease termination obligation associated with the relocation of the Company's San Francisco-based loan administration department to southern California. The Company also incurred write-downs of $3.7 million on operating leases associated with the commercial leasing business, which were primarily a result of reductions in estimated residual values. These higher operating expenses, exclusive of the operating leases, are reflective of recently completed acquisitions and ongoing investments made in conjunction with the execution of First Banks' overall business plan. At June 30, 2003, First Banks had consolidated assets of $7.10 billion and operated 151 offices in Missouri, Illinois, California and Texas. # # # This release contains forward-looking statements that are subject to risks and uncertainties arising out of or affecting the Company's business, not all of which can be predicted or anticipated. These statements are based on information currently available to First Banks' management, and numerous factors might cause actual results to differ materially from those contemplated in the forward-looking statements. For additional information, see the discussions of forward-looking statements that appear in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of First Banks' most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, as filed with the Securities and Exchange Commission. FIRST BANKS, INC. FINANCIAL SUMMARY (in thousands, except per share data) (unaudited) Condensed Consolidated Statement of Income Information Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Interest income............................................... $ 98,270 107,303 197,877 213,915 Interest expense.............................................. 27,257 41,615 57,701 84,105 Net interest income........................................ 71,013 65,688 140,176 129,810 Provision for loan losses..................................... 10,000 12,000 21,000 25,000 Noninterest income............................................ 25,431 20,529 57,076 39,364 Noninterest expense........................................... 64,051 59,220 123,736 116,078 Income before provision for income taxes................... 22,393 14,997 52,516 28,096 Provision for income taxes.................................... 7,693 5,328 18,785 10,099 Net income................................................. 14,700 9,368 33,731 17,368 Basic earnings per common share............................... $ 615.70 390.35 1,411.74 720.18 ======== ======== ========= ======= Diluted earnings per common share............................. $ 606.04 384.48 1,390.06 712.75 ======== ======== ========= ======= Condensed Consolidated Balance Sheet Information June 30, December 31, 2003 2002 --------------- ------------- Total assets......................................................... $ 7,099,239 7,342,800 Investment securities................................................ 873,948 1,137,320 Loans, net of unearned discount...................................... 5,385,599 5,432,588 Allowance for loan losses............................................ 107,848 99,439 Deposits............................................................. 6,014,786 6,172,820 Note payable......................................................... 34,500 7,000 Stockholders' equity................................................. 538,517 519,041 Nonperforming assets................................................. 83,181 82,774 Selected Financial Ratios Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 2003 2002 2003 2002 ---- ---- ---- ---- Return on average assets.................................... 0.82% 0.54% 0.95% 0.51% Return on average equity.................................... 11.03 8.16 12.82 7.69 Net interest margin......................................... 4.44 4.24 4.40 4.22 Efficiency ratio............................................ 66.41 68.69 62.73 68.61